If You Trade The Dollar, Here’s What You Need To Know About This Rally

The oversold condition of the market and a lack
of follow-through selling on the move to new contract lows yesterday helped
support the bounce but a lack of aggressive buying left the market slightly
higher in quiet trade. A firm tone to the cash market basis levels and less
producer selling than traders had anticipated this week helped to trigger some
of the short covering and strength in the other grains added to the positive
tone. Excellent weather for the developing corn crop in Argentina and talk that
the production forecast for Argentina may be raised in next weeks USDA world
supply/demand report helped limit the buying. For the weekly export sales
report, released before the opening, traders are looking for sales near
400,000-700,000 tons as compared with last weeks sales at 751,700 tons.
Resistance for March corn comes in at 203 1/2 and 204 1/2 with 201 3/4 and 198
as next support.

Technical Outlook

CORN (MAR) 01/06/2005: The downside crossover (9
below 18) of the moving averages suggests a developing short-term downtrend.
Daily stochastics are trending lower but have declined into oversold territory.
The major trend has turned down with the cross over back below the 18-day moving
average. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. The next downside objective is 200 1/4. The next area
of resistance is around 202 1/4 and 203 1/4, while 1st support hits today at 200
3/4 and below there at 200 1/4.

 

SOY COMPLEX RECAP

1/5/2005

March Soybeans finished up 2 at 527, 4 1/2 off
the high and 1 up from the low. May Soybeans closed up 1 at 531. This was 1 up
from the low and 4 off the high.

March Soymeal closed unchanged at 155.9. This was
0.4 up from the low and 2.7 off the high.

March Soybean Oil finished up 0.1 at 20.07, 0.09
off the high and 0.11 up from the low.

News from the USDA that China bought 116,000 tons
of US soybeans helped slow the active fund selling of the past few sessions and
supported a strong recovery in soybeans early in the session but the buying
slowed late in the day with continued talk of good weather in South America
helping to limit the buying support. A firm cash market and a lack of deliveries
for January soybeans and meal helped provide support as well. Talk of an
oversold technical condition after a 3-day, 25 cent sell-off helped trigger some
short-covering as well. Some of the dry areas of southern Brazil received rain
this week after several weeks of dryness re-ignited talk of a record yielding
Brazil crop this year and reports from Argentina show the crop on pace for
record yields as well. Iran cancelled tenders for Brazil oil and Malaysia palm
oil today indicating that they will wait for better prices. For the weekly
export sales report, released before the opening, traders are looking for
soybean sales near 500,000-900,000 tons, meal sales of 50,000-100,000 tons and
oil sales of 5,000-10,000 tons. Resistance for March soybeans comes in at 532
and 535 with 524 1/2 and 518 as next support.

Technical Outlook

BEANS (MAR) 01/06/2005: The downside crossover (9
below 18) of the moving averages suggests a developing short-term downtrend.
Momentum studies are still bearish but are now at oversold levels and will tend
to support reversal action if it occurs. The close below the 18-day moving
average is an indication the longer-term trend has turned down. It is a mildly
bullish indicator that the market closed over the pivot swing number. The next
downside target is now at 522 1/2. The next area of resistance is around 529 3/4
and 533 1/4, while 1st support hits today at 524 1/4 and below there at 522 1/2.

MEAL (MAR) 01/06/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 18-day moving average is an indication the longer-term trend has
turned down. It is a slightly negative indicator that the close was lower than
the pivot swing number. The next downside objective is now at 153.4. The next
area of resistance is around 157.4 and 159.5, while 1st support hits today at
154.4 and below there at 153.4.

BEANOIL (MAR) 01/06/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 18-day moving average is an indication the longer-term trend has
turned down. The close over the pivot swing is a somewhat positive setup. The
next downside target is 19.87. The next area of resistance is around 20.17 and
20.26, while 1st support hits today at 19.97 and below there at 19.87.

 

WHEAT MARKET RECAP

1/5/2005

March Wheat finished up 3 3/4 at 299 3/4, 1 1/4 off the high
and 1 3/4 up from the low. May Wheat closed up 3 1/4 at 307 1/4. This was 1 1/4
up from the low and 1 1/4 off the high.

Funds were noted buyers of near 1500 contracts
into the mid-session which helped support moderate gains. After attracting
massive selling from fund traders yesterday, the market is already nearly 8
cents off of yesterday’s lows. The late sell-off in the other grains did not
have a big impact on the wheat market. The downside break-out yesterday from the
recent consolidation had traders viewing the technical action as bearish and
traders looked for significant follow-through selling today but so far, the
selling has not materialized. With the winter wheat seedings report for release
next week, the market found support from the outlook for declining acres. Winter
wheat planted acreage in 2004 totaled 43.35 million acres. Informa Economics,
formerly Sparks, pegged US winter wheat plantings for 2005 at 42.3 million
acres. This news helped support the market but the trade remains concerned over
a lack of weather problems for the worlds key wheat producers. For the weekly
export sales report, released before the opening, traders are looking for sales
near 250,000-275,000 tons as compared with last weeks sales at 244,500 tons.
March wheat resistance comes in at 299 3/4 and 302 with support at 292 1/4 and
288 1/2.

Technical Outlook

WHEAT (MAR) 01/06/2005: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The close under the 18-day moving average indicates the longer-term trend
could be turning down. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. The next downside objective is now at
296 3/4. The next area of resistance is around 301 1/4 and 302 1/2, while 1st
support hits today at 298 1/4 and below there at 296 3/4.

 

LIVE CATTLE RECAP

1/5/2005

February Live Cattle closed down 1.07 at 89.40.
This was 0.75 up from the low and 1.20 off the high.

January Feeder Cattle finished down 0.62 at
104.15, 0.60 off the high and 1.20 up from the low.

The market drove sharply lower on the session
after the higher opening on weather concerns failed to attract new buyers. The
weather did not seem to be as bad as advertised and without more moisture later
this week; feedlots are expected to begin to dry out again. Weak demand seemed
to be the primary reason for the break as packer demand looks weak due to poor
margins and beef prices continued to dip in spite of the lower than expected
slaughter of the past several days. Slaughter came in at just 102,000 head as
compared with trade expectations for 105,000-120,000 head. The lower than
expected slaughter indicates weak packer demand. Boxed-beef cut-out values were
down $1.13 cents to $139.11 as compared with $142.45 one week ago. February
cattle held support at 88.62 (a 50% retracement of the October-December rally)
and bounced a bit higher into the close. Additional support comes in at 87.82.

Technical Outlook

CATTLE (FEB) 01/06/2005: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The cross
over and close above the 18-day moving average is an indication the longer-term
trend has turned positive. The daily closing price reversal down is a negative
indicator for prices. The market’s close below the 1st swing support number
suggests a moderately negative setup for today. The next downside objective is
now at 87.570. The next area of resistance is around 90.370 and 91.450, while
1st support hits today at 88.450 and below there at 87.570.

 

LEAN HOGS RECAP

1/5/2005

February Lean Hogs closed down 0.75 at 75.75.
This was 0.50 up from the low and 0.30 off the high.

February Pork Bellies finished down 0.87 at
93.95, 0.25 off the high and 0.75 up from the low.

February hogs pushed moderately lower on the
session as demand fears due to declining packer profit margins and a lack of
weather support helped trigger additional long liquidation selling. Peoria cash
hogs were down $3.00 on the session as compared with expectations that the
market would be higher. While weather reduced hog marketings, traders look for a
bulge in marketings once the weather clears. The bearish weekly cold storage
report along with talk of a lower slaughter on Saturday helped add to the
negative tone. The 2-Day Lean index was up 1.01 to 66.10 as compared with 65.46
last week at this time. The stiff premium of futures to the cash helped limit
the buying. Slaughter came in at 390,000 head as compared with trade
expectations for 365,000-390,000 head.

Technical Outlook

HOGS (FEB) 01/06/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The market now above the
18-day moving average suggests the longer-term trend has turned up. The market
setup is somewhat negative with the close under the 1st swing support. The
near-term upside objective is at 76.500. The next area of resistance is around
76.150 and 76.500, while 1st support hits today at 75.370 and below there at
74.920.

 

COCOA MARKET RECAP

1/5/2005

March Cocoa finished up 3 at 1526, 14 off the
high and 9 up from the low.

The pattern of light selling continued in cocoa
with the small spec and fund accounts slowing giving up and moving to the
sidelines. We have to think that the massive rise in the US Dollar undermined
cocoa and extended the recent weakness in cocoa prices. With more technical
damage on the charts we suspect that the bears will remain in control over the
near term trend. Some traders suggested that the recent break in copper
dramatically pulled down the spec long position and that seems to put copper in
an extremely favorable technical position.

Technical Outlook

COCOA (MAR) 01/06/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 18-day moving average is an indication the longer-term trend has
turned down. The upside closing price reversal on the daily chart is somewhat
bullish. The close over the pivot swing is a somewhat positive setup. The next
downside target is now at 1505. The next area of resistance is around 1537 and
1550, while 1st support hits today at 1515 and below there at 1505.

 

COFFEE MARKET RECAP

1/5/2005

March Coffee closed down 2.95 at 98.50. This was
0.50 up from the low and 6.25 off the high.

The lowest close since December 14th combined
with the hefty net long position of the fund trader leaves the market in a long
liquidation mode as commercial buyers seem to be slow to come in to provide
underlying support. While Brazil stocks seem to be in strong hands, Central
American producers seem a bit more anxious to sell with prices near 4-year
highs. Key retracement and support levels from the October to December rally
comes in at 95.90 and 91.90 for the March contract.

Technical Outlook

COFFEE (MAR) 01/06/2005: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The close
under the 18-day moving average indicates the longer-term trend could be turning
down. The outside day down is somewhat negative. The market is in a bearish
position with the close below the 2nd swing support number. The next downside
target is now at 93.20. The next area of resistance is around 101.85 and 106.65,
while 1st support hits today at 95.15 and below there at 93.20.

 

SUGAR MARKET RECAP

1/5/2005

March Sugar closed down 0.05 at 8.98. This was
0.12 up from the low and equal to the high.

The sugar market managed a massive slide lower
and while part of that decline was rejected the negative impact of the action
Wednesday lives on. We suspect that sugar saw some light return buying following
yet another decline in US energy prices as that increases the chance of lower
shipping costs for sugar. With open interest in sugar holding at record levels
one has to consider any violation of chart support as a serious development. It
seems that the funds were the big sellers early in the session but apparently
some funds decided to scramble out of fresh shorts into the closing recovery.

Technical Outlook

SUGAR (MAR) 01/06/2005: Momentum studies trending
lower from overbought levels is a bearish indicator and would tend to reinforce
lower price action. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The gap lower price action on the day session
chart is a bearish indicator for trend. The market’s close below the pivot swing
number is a mildly negative setup. The next downside objective is now at 8.83.
The next area of resistance is around 9.03 and 9.07, while 1st support hits
today at 8.92 and below there at 8.83.

 

COTTON MARKET RECAP

1/5/2005

March Cotton finished up 1.13 at 45.62, 0.08 off
the high and 1.12 up from the low.

The break-out to the upside was led by active
fund buying, thought to be short-covering, with trade house buying helping to
support the early gains. Optimistic views on China demand expected to be
reported at the annual US Beltwide conference this week helped support the
active buying trend of the session. Key industry traders indicated that China
production may drop to near 26.75 for the coming season as compared with 29
million bales last year and that consumption from China will continue to
increase to 38 million bales this year from 36.5 million this past season. For
the weekly export sales report, released before the opening, traders are looking
for sales near 200,000-275,000 bales as compared with last weeks sales at
244,500 bales.

Technical Outlook

COTTON (MAR) 01/06/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests the
longer-term trend has turned up. There could be more upside follow through since
the market closed above the 2nd swing resistance. The next upside target is
46.56. The next area of resistance is around 46.22 and 46.56, while 1st support
hits today at 45.02 and below there at 44.16.